Baroness Williams of Trafford
To ask Her Majesty’s Government what are the latest figures they have for the business investment component of the total gross fixed capital formation (GFCF); and what plans they have to increase business investment in the future.
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Viscount Younger of Leckie) (Con)
Through industrial strategy and our structural reforms, we are setting the long-term direction needed to give businesses the confidence to invest, export and grow. Business investment was £123 billion in 2013, accounting for more than half of overall investment. The OBR forecasts that it will grow by 8% in 2014. At Budget, we announced further funding for innovation, including £42 million for the Alan Turing Institute and £74 million on cell therapy and graphene centres.
Baroness Williams of Trafford (Con)
I thank my noble friend for his response. Can he pinpoint the cause of the increase in investor confidence?
Viscount Younger of Leckie
My Lords, the economy is growing, and unemployment and inflation are down. This is supported by an improving outlook in our export markets. We are cutting corporation tax to 21% this April, and to 20% in April 2015. At Budget, the Chancellor announced measures to reduce business energy costs and doubled our export finance scheme to £3 billion. These and other reforms are improving the business environment and providing long-term certainty for businesses, investors and employees.
Lord Kinnock (Lab)
Will the Minister tell the House the full story shown by the Office for National Statistics, which is that business investment since 2010 has been flat, faltering or falling, and that we are in a state in which it has shrunk, by comparison with 2010, by about 7%? Whatever happened to the march of the makers?
Viscount Younger of Leckie
Business investment is a very narrow measure, which excludes investment by firms in skills, innovation and organisational change. When estimates of these types of investment are included, the UK’s performance is much improved, as we tend to invest heavily in these types of knowledge asset. It is also important to recognise that quality of investment is as important as quantity.
Lord Forsyth of Drumlean (Con)
Has my noble friend noticed the disinvestment that is taking place in the energy sector, thanks to the irresponsible policies announced by the Opposition to bring in price controls?
Viscount Younger of Leckie
Yes, I have noticed that. Having said that, we are doing much in terms of the Green Investment Bank, which has invested directly and indirectly in 22 projects from five dedicated funds. It has directly committed £791 million, which will mobilise a total of £3.3 billion when fully deployed.
Lord Garel-Jones (Con)
My noble friend will no doubt be aware of the Pacific Alliance treaty signed by Mexico, Colombia, Peru and Chile, which Costa Rica and Panama are shortly to join. Given that this represents the seventh or eighth largest trading bloc in the world, what steps are Her Majesty’s Government taking to encourage trade and investment with this important area?
Viscount Younger of Leckie
My noble friend is right. I am aware of this and the Government are working hard to increase trade in this area. My noble friend Lord Livingston recently headed up a successful trade mission to Colombia and Mexico, with some promising leads. I take this opportunity to congratulate my noble friend Lady Bonham-Carter on her excellent work as the Prime Minister’s trade envoy to Mexico. Exports of British goods to Mexico increased by 51% between 2009 and 2012.
Lord McFall of Alcluith (Lab)
My Lords, is the Minister aware that the banking system here is responsible for 80% of the loans to small businesses in this country, unlike in the US? This intermediation system is bursting. Until the Government look at the issue of capital and equity support for businesses, we ain’t going to regenerate this economy in all parts of the country.
Viscount Younger of Leckie
I am afraid I do not accept the negative attitude that comes from the noble Lord. In fact, much has been done to provide financial support for businesses. Over the last quarter of 2013, the banks lent an average of £4 billion each month to SMEs. In the same period in 2012, the average was £3.1 billion. Respondents to the Bank of England’s Credit Conditions Survey reported that the overall availability of credit to the corporate sector increased significantly in the final quarter of 2013.
Lord Stoneham of Droxford (LD)
In the light of the good news that Hitachi is intending to invest in rolling stock manufacturing capacity and that Siemens is investing in wind farm equipment manufacturing in the UK, what further efforts are the Government making to use their procurement strength to ensure that we get more manufacturing capacity invested in the UK and more apprentices?
Viscount Younger of Leckie
My noble friend is right to highlight the excellent news that Siemens is to invest £160 million in the Hull area. Hitachi’s announcement that it will move its global rail headquarters to the UK is a further vote of confidence in companies investing in the UK. Among other actions, the Government recently announced a new college to train the next generation of world-class engineers working on the construction of High Speed 2, and we hope that it will train up to 2,000 apprentices. This will provide further opportunities for young people to have secure, long-term careers.
Lord Stevenson of Balmacara (Lab)
In response to an earlier question, the Minister said that GFCF was a narrow measure. However, is it not true that it also includes expenditure on buildings, including houses for rent? Therefore, the figures conceal a considerable loss of money in terms of the productive economy.
Viscount Younger of Leckie
I am not sure that I agree with the noble Lord on that. What matters is the decisive action that the Government are taking to protect the economy in this period of global uncertainty. Our economic policy objective overall is to achieve strong, sustainable and balanced growth that is more evenly shared across the country and between industries, and that has a focus on property, too. We want to create the most competitive tax system in the G20, make the UK the best place in Europe to start, finance and grow a business, and create a more educated workforce that is the most flexible in Europe.
Lord Tebbit (Con)
Can my noble friend perhaps have a chat with the noble Lord, Lord Kinnock, to see whether he can help us by pleading with his masters in Brussels to allow us to get on with investing in a nuclear energy programme? That would be really helpful. I see that the noble Lord, Lord Kinnock, shakes his head—he cannot do it.
Viscount Younger of Leckie
I am always happy to have a chat with the noble Lord, Lord Kinnock, and perhaps that will happen.